The intent of RMD is to claw back the taxes you didn't pay when you were working. The RMD is age indexed so _in theory_ there will be very little left by the time you die. The problem with taking your RMDs and converting it to a Roth IRA in retirement is you can't do it legally. And most advisors tell you it's a net loss to convert while you're working. A better plan is to take your RMD as required, and then just put it into an indexed equity fund that will grow along with the market. You can do that yourself without an advisor.
As discussed in a few of your videos you could also use asset location to reduce the creep. This of course only works if you have either a ROTH IRA or Taxable account or Both. Put as much of your overall asset allocation of Bonds into your tax deferred account. The Bonds will tend to grow at a slower rate thereby reducing future RMD's. You would still have the Stock portion of your total allocation but in the ROTH IRA and/or Taxable account.
I think most people would be happy to have enough saved for an RMD pushing the IRMAA threshold. also since half of SS income counts towards the "combined income" it doesn't leave much room for other income at all if you have a decent SS payment. the government can't make it simple
I am already 70 and still working. It is too late for me to all these Roth conversion business. I am going to simply pay the required taxes and be done with it. It is not going to push me into poverty. I’m way better off than billions of people in the world. Thinking about not being financially savvy in the past will only make me feel depressed.
Also another point...you have almost an extra 100,000 in the 24% MFJ tax bracket, which will be the 33% tax bracket when the TCJA expires in 2025. Great time for monster Roth conversions
Converting too much means saying goodbye to your Affordable Care Act subsidy because your income will appear much higher. That could be as much as a $14,000/yr loss….in my case.
Another approach, depending on overall finances of course, is to leave it in and use it to self-insure long term care. If you ever need to, you can write off the portion of your withdrawals used to pay for ltc in excess of the 7.5% agi threshold. The net tax could then be much less than you would pay on Roth conversions. And, if it turns out that you don't ltc and end up with higher tax on your RMDs, well you will likely be able to afford it.
Because as you say the TCJA expiration and married filling jointly when one spouse passes, plus the social security tax torpedo Suck it up do it all at once with a giant Roth conversion. Yes, you will get hit with IRRMA for one year. But after that, never worry about RMDs again and you will be in total control of your taxes forever. Even when one spouse passes. You may be lucky enough to never pay taxes again. It’s worth the one time hit.
Less taxes mean more food to the previous comment. Could you also discuss a QLAC and an in marriage QDRO and if earlier a one time HSA contribution as ways to reduce the deferred pot and hence reduce RMDs and taxes. Also can discuss optimum age timing for each ?
Take your RMD. Then later same year contribute the max ($7000) back into to your IRA. That will offset your tax liability. The Secure Act allows you to contribute after 72. Just keep mind that you or your spouse will need to have enough earned income to contribute to your IRA
So to reduce RMD taxes I should give it to charity? Silly me, I always thought my 401K/IRA which I was feeding for 45 years was mine so I could live in retirement...
You forget to mention the most important thing. Retirement accounts are at the mercy of the stock market. Corporate America and the politicians they bought forced the working class to gamble with their retirement money on stock market. I see many retired people bagging groceries and collecting shopping carts. Back at work after stock market ate away their retirement.
There are flaws in this logic: - If you have mutual funds, there will be dividend and capital gains distributions that are unpredictable and often large, and can push you into the next IRMAA bracket - A Roth conversion means that instead of deferring taxes, you are paying them earlier, so you lose the tax deferred compounding in your IRA on that money. You may not have enough remaining years in your life for the Roth to come out ahead - The tax brackets in 2025 when the current TCJA expires will likely be replaced by something else that could be better - If you have income from a pension, that is probably not going to have cost of living increases whereas the tax brackets will move up with inflation, so the effective tax rate on your overall income may go down over time
There are not flaws with the logic: - We teach that you should not own mutual funds in your taxable account for this exact reason. Now if you have large unrealized gains that won't allow you to exit the taxable account prudently, then you need to leave room for the large potential capital gain. - The math for Roth Conversions comes down to the rate (including penalties, tax hurdles, etc) you are paying today vs. the rate you are avoiding in the future. You only perform the conversion if you are confident you will be paying higher rates down the road. Once RMDs have begun, future RMD estimations become more accurate - You have to plan under the rules we know today - This is all built into the calculation. Note that the tax bracket rise through time in the charts we've shown. A good plan factors all of this in.
I believe his math, but you are correct that mutual funds can cause issues making it difficult to estimate later taxes. They suggest not owning mutual funds in taxable accounts, but I prefer to have some since one needs to have money in multiple buckets. My mutual fund money has been good to pay for some expenses in retirement in my mid fifties, as well as to cover the taxes due on ROTH conversions. Before SS and 59.5 if you need money, I found them the best resource. The alternative would have been to just keep that money in savings accounts making little, where the mutual funds in many years made over 10%. Compounding over many years those mutual funds have made hundreds of thousands of dollars over what a savings account would have and were a useful tool as another source of readily available funds if needed.
Most CFPs say the same thing as Eric... your trad IRAs gains will be taxed when you withdraw or convert, either way. Once in the Roth they will gain tax free, comes out the same. Only advantage of Roth conv is if you will be in higher bracket in future...for many of us RMDs will force into higher brackets, + likely that tax cuts end as well.
Believe It Or Not: There are strategies after RMDs begin to help you reduce taxes. Thanks, Eric and Safeguard Wealth Management for continued content excellence!
Here's an RMD question the answer to which I have searched for hours. Your RMD is based on the value of your IRA on Dec. 31 of the previous year. If you use the Lifetime Table to compute the amount of your RMD, you are expected to divide the figure from that table into your balance. Logically, the DATE when that figure should be taken from the table would be the same day that the amount is computed. HOWEVER, my plan seems to use the date taken from my age at the end of the following year. Nowhere is this used date spelled out. If your plan withholds 10% for Federal tax, you must compute your RMD at the beginning of each year in order to compute the amount of withholding. This will then allow you to adjust your pension withholding amount. That's why I'd like to find where the DATE on which the Lifetime table is computed is explained. Every source on the WWW simply spouts that the table is used, but you are one year older at the end than at the beginning of the year. See my confusion?
Really? Your arrogance is amazing. Based on my 50 years of experience paying attention to my investments, I’d argue that 90% of investors ARE that ignorant
But I don’t understand why it wouldn’t be better to do say, two years of maximum amount conversions, taking the hit for a couple of years, including irmaa, if that will assure elimination of taxable RMD’s
What if instead of Roth conversions, withdrawing greater than RMD to the next tax bracket & transferring to brokerage account may be more advantageous. (1) Not paying on Roth conversions (2) No QCD (3) Reduces future RMD (4) Easily accessible money & not tied up like in Roth IRA (5) Step up basis for heirs Please comment if any draw backs to what I am thinking Thanks Only thing is paying LTCG which is still better.
That would not help at all and be worse for you financially. Withdrawing extra money from a traditional IRA above the RMD is the same tax consequence as doing an Roth conversion on the same amount of money from the same traditional IRA. There is no tax difference in the current year between the two. However, by withdrawing the money to put in your taxable account, you forfeit the tax-free growth that happens in a Roth account after the conversion takes place. Money is not "tied up" in a Roth IRA when you are old enough to be forced to take RMDs any more than it is tied up in a traditional brokerage account.
Depending on the size of the tax deferred account converting to a Roth IRA can take many years if ever to make up for the taxes paid. Looked at this 3 ways from Sunday and it just does not make sense for me.
I had a financial plan done and it shows my income spiking into higher brackets once I start RMDs, income I don't even need. Roth conversions make sense for me.
I read an article yesterday that said a new law just passed changing the RMD age from 72 to 75 and one lawmaker wants to eliminate the RMD completely do you have any knowledge of this?
@@hubster4477 they will eventually get it. They just want to tell you when and how much. Why should they control my money and tell me when and how to spend it.the government has too much control.
I've been told you can move 401k money to an IRA and pay the taxes on it then move it over to a Roth IRA to shield future gains from taxes. Is this true and if so is there a limit to how much money you can move through this process? This would be money I'd move before age 72 so not RMD money. Also can you pay the taxes out of the money you are moving? So say you move $100k chunks each year and owe 30% fed and state on it you would pay $30000 tax and end up with $70000 in your Roth.
@Tim. You can just go from 401k to Roth IRA directly. There is no limit. The more you convert in any given year then the higher the tax bracket. So you would ideally only convert an amount that puts you into a lower tax bracket. You can’t pay the taxes out of “conversion” but you can from “withdrawals”. Your tax calculations are way off also. Even 100k remember you get a 12k standard deduction. So this puts you at 88k taxable income. If you’re over 65 you get an additional 1,400. The 22% bracket is up to 89,075. It’s a step up basis also. There is 12% bracket. So your first 41,775 is taxed at 12%. Anything above up to 89,075 is at 22%. So effect tax rate more like 18-19% Even with state tax at these levels it can’t be at 10%. More like 3-5%. So overall 23% So if you “convert” 100k then you have to come up with 18-19k for taxes. That’s a lot of money. Yes? Since many don’t have excess cash on hand you have to do like 75% conversion and 25% withdrawal. So you convert 75k from 401k to Roth IRA then withdraw 25k from 401k into your regular bank account. It’s still 100k gross income concept. Write a check to IRS and state. Careful with estimated tax payments. You would have a little excess cash too. Some other ways you can achieve cash on hand is to sell your home and/or cars. The added benefit is that if you move to a no income tax state you can save maybe 5-10% in state taxes. You may want to look at and study your past tax returns.
@@f430ferrari5 I think they said if I move it to the IRA and park it there then I can feed the Roth the amount each year to avoid hitting the next tax bracket. They said going from 401k to IRA is not a taxable event. I'd wait until December to see what kinds of capital gains and dividends will stack on income to determine the number that goes to the Roth. I made a big mistake. I should have never funded my entire 401K with pretax money.
@@timtoolman9940 yes going from 401k to IRA is not taxable. Maybe the recommendation is so when moving the IRA some portion is kept in money market? Just be aware that 401k offers more protection pertaining to legal matters. I would not say you made a mistake either. We all tend to feel this way when looking at a Roth. Not sure how you saved in 401k but if your balance isn’t that high you can probably just take annual withdrawals on top of SS and still be in the tax bracket you want to be in. It’s important you know how SS is potentially taxed. It may not be as high as you think. Most were better off going tax deferred. There is a window to convert and this method is better than going straight Roth from the beginning. For anybody starting work now and they are in low bracket to begin with then Roth IRA makes sense. It doesn’t have to be even a lot. 1k per year starting at 25 years old can grow big.
@@f430ferrari5 I'll need to study your post here a lot of very good information in it. So it goes 401k to Roth then to pay the tax I withdraw from the Roth? Or better if I have other sources for the tax which I do an can use those for taxes and leave the Roth money in there. I remember the IRA step was when I was thinking about dissolving the 401k which I decided not to do that, if I can move about half the 401k to Roth over 7 years that would really help when RMDs start.
If you don't need the funds from your RMD, you can give it directly to a charity. It counts as your RMD, but you owe no tax and it does not show as income.
I know you're trying to help, but this is absolutely RIDICULOUS. . .The insanely complicated machinations you describe to try to deal with this is the best evidence of how absurd our tax system is. The only reason any of this is complex or requires "learning" convoluted strategies is because the government WANTS to beat its own citizens down. YES it does. It wants as much of your money as possible and does NOT care about how that affects you. You're supposed to spend time and/or money to "learn" how to circumvent the government's "rules". The reason is because our government has NO interest in its own citizens at all. NO, it really doesn't. If it did it would go out of its way to make things easier, simpler and more beneficial for the people, NOT for itself. That's been true of EVERY society that has ever existed, and its true of America as well.
If I roll-over, my 401 k and IRA to my new job will I need take RMD'S ? My understanding is with my new employer I am not required to take an RMD while still woking , even after age 72.
Also take unneeded RMD and perform ROTH conversion at the beginning of the year. This will move that years gains out of the qualified accounts (IRA, 401k) and into the non-qualified accounts (brokerage or ROTH). Of course the market could have no gains that year so some years you would lose but you can't time the market. I do my conversions in January and when I turn 72 I plan on taking any RMD that I don't need to spend in January. If I need RMD for income I plan on taking them monthly.
This makes no sense. You want to leave the RMD money in your IRA until the end of the year so that you can continue to earn money on it during the year (assuming the stock market is going up), and keep that year's gains from being taxed in that year
@@topliner9534 If I do that my RMDs keep growing. If I take RMDs I do not need at the beginning of the year I help minimize RMD creep. If I invest in a mix of exchange traded index funds and never sell the ETF I will owe no tax on the gains in the brokerage account. When I die the tax on the ETF disappears so my heirs owe nothing. If I keep it in the IRA then that will grow increasing RMDs increasing taxes each year. When I die my heirs will have to withdraw the IRA over ten years and owe taxes on the withdrawals. My way the heirs get the ETF with no taxes owed due to the cost basis step up (in addition to owing no taxes on my Roth). This only works if I do not need the RMD. RMDs I need to live I would take out on a monthly basis to keep as much in the IRA or the ETF brokerage account sheltered from taxes.. At first glance it seems I'm doing it backwards but if I'm disciplined and truly don't need the RMD, this is one way to minimize taxes.
I read this article yesterday. The RMD age is changing and also one lawmaker is pushing to eliminate it completely. Fingers crossed but if not I love your plan and I will use it by converting to Roth. Transformative’ retirement reform package passes the House and heads to the Senate @@cgmoog Proponents note Secure 2.0 will give retirees - who are living longer than previous generations - more flexibility as they manage a longer retirement. For one thing, it gives workers more options for “catch-up" contributions as they near retirement, up to $10,000 per year. Another key provision gradually raises the age for taking mandatory distributions from 401(k) plans or IRAs to 75 from 72. Some lawmakers want to take things even further with required minimum distributions. “My goal is to get rid of it completely,” Brady said of the age restrictions on distributions during an appearance at the Bipartisan Policy Center Solutions Summit streamed on Yahoo Finance in 2020.
Eric, maybe you mentioned it, but I can’t find it . . . * @ 4:50 you told us that the couple had delayed taking SS (I assume age 70) * and now it was time to take RMDs ( I assume age 72: RMD = 3.91%, so $38k is the RMD for $978k) * what is the Total Social Security Benefits being drawn by this couple?
At some point and time, for me it's age 73. The government wants its fair share in taxes. If you don't plan on spending it at that time you can roll it into a Roth account.
Reading about people grabbing multi-figures monthly as incomes in investments even in this crazy days in the market, any pointers on how to make substantial progress in earning? I would appreciate
I don't trade, I invest with a professional assigned by a crypto company that trades for people and returns profits on weekly basis for me and you can invest your capital and get weekly Returns of investment (ROI) without any extra fees attached
@@karimdarcy5533 Really you know her😳... I even thought I'm the only one she had helped walk through the fears and fall of forex trading. With my initial investment of 5,000€ , I made a profit of 11,500€ in Six days with Ms Angela Jones.
Does your firm offer a one-time client project fee to develop a forward looking tax plan, or do you only offer those services to clients who place their investment portfolio under your firm’s management? Thanks- Craig F.
@@nalinijanakiraman2481 I e-mailed them with the same question! They only do the full asset management and only on portfolio's $3 million and up. No fee-for-service at this time. I believe they could have a HUGE business creating forward looking plans for folks. I'd pay big $$ for it. Oh, well.
Got me thinking... consider the situation of only one spouse covered by Medicare for the next several years. I am just under 60 and my wife is 66.5, obviously she's already started Medicare. Since we're only paying Medicare premium for one, if we exceed that first IRMAA threshold in 2022 we would only be paying about $700 extra in 2024. That in and of itself may not be reason enough to limit IRA conversions, especially if you manage conversions so you only pay the higher premium for 1 year. Even so, we probably will choose to stay under the 24% bracket. (Her IRA 913k, my IRA 1350k).
I am like Suzanne. Turning 72 this year and taking an RMD wallop. As far as taking a Roth conversion, I believe that that ship has sailed. Too expensive and too complicated at this point. But you never did talk about a deferred annuity, which could take a bit of the bite from your required minimum distribution.
Yup he didn’t mention a QLAC(Qualified Longevity Annuity Contract) as a way to reduce RMD’s but the most you can put in a QLAC is 25% of IRA or $135k whichever is less. But it’s also only kicking the can down the road up to age 85.
@@stephaniejames4775 talk to a Financial Advisor. If you can defer $135k into a QLAC it saves you from RMD amount about $5k/yr less withdrawals required at age 72.
$50,000 RMD? Why are all these videos aimed at the wealthy? We all have RMDs if we have an IRA. I guess the wealthy is how these guys make their living. I’ll keep searching for help for the rest of us.😢
It's very interesting how something targeted for 70+ individuals is being put on TH-cam. Would love to see the metrics of 70+ viewers. Just wanted to add Secure Act 2.0 passing would change future RMD age. As of now it'll be 73 starting next year, 74 in 2029 and 75 in 2032.
Actually, I think his target audience is people 72 and older, plus people who would like to someday become 72 and older and want to think ahead and prepare.
I'm 71. I was wondering why I had not heard a lot about all of this when I was younger. It should be targeted at folks in their 30s and older so they will understand and be able to lan better for retirement. I found all of this RMD, Roth, IRRMA, retirement taxation stuff to be very confusing and complicated, and I have an MBA.
@@markpaul8255 Back then it wasn't but now with the Internet people don't have an excuse not to know. I'm 34 and just by watching a few videos and reading the IRS documentation you can learn 70% of what you need to plan for retirement.
Sorry, you poor rambling sentence structures confuse the concepts and your graphs make it worse. Your videos show you fail at teaching, I will not watch any other video by you. I understand why another comment said their head was spinning, Please hire a writer who more clearly explains - because you can't,
I think ROTH IRAs should just be gotten rid of, they were supposed to be for modest amounts of money of modest income people to avoid some cap gains taxes, but clearly the entitled rich people abuse them to avoid paying their taxes and to get subsidized health care. This just pushes more of the tax burden onto people who are working. If an old person has more money than they can spend in their lifetime (the RMD schedule is designed to not use up the account until age 120), why not pay taxes like everyone else. It seems very unpatriotic.
Im going to have to listen to this about 40 times.
Y'all live in different world than mine. I'll be taking RMD and more as Cash now means better food budget Now . Taxes are least of my worries.
Also want to add, it is not about being clever, it is about not being ignorant.
The intent of RMD is to claw back the taxes you didn't pay when you were working. The RMD is age indexed so _in theory_ there will be very little left by the time you die. The problem with taking your RMDs and converting it to a Roth IRA in retirement is you can't do it legally. And most advisors tell you it's a net loss to convert while you're working. A better plan is to take your RMD as required, and then just put it into an indexed equity fund that will grow along with the market. You can do that yourself without an advisor.
So convert between working and RMDs.
Most people stop working by 65 right? That leaves until 72 now and until 75 for younger people.
As discussed in a few of your videos you could also use asset location to reduce the creep. This of course only works if you have either a ROTH IRA or Taxable account or Both. Put as much of your overall asset allocation of Bonds into your tax deferred account. The Bonds will tend to grow at a slower rate thereby reducing future RMD's. You would still have the Stock portion of your total allocation but in the ROTH IRA and/or Taxable account.
I think most people would be happy to have enough saved for an RMD pushing the IRMAA threshold.
also since half of SS income counts towards the "combined income" it doesn't leave much room for other income at all if you have a decent SS payment.
the government can't make it simple
I am already 70 and still working. It is too late for me to all these Roth conversion business. I am going to simply pay the required taxes and be done with it. It is not going to push me into poverty. I’m way better off than billions of people in the world. Thinking about not being financially savvy in the past will only make me feel depressed.
Also another point...you have almost an extra 100,000 in the 24% MFJ tax bracket, which will be the 33% tax bracket when the TCJA expires in 2025. Great time for monster Roth conversions
Converting too much means saying goodbye to your Affordable Care Act subsidy because your income will appear much higher. That could be as much as a $14,000/yr loss….in my case.
Another approach, depending on overall finances of course, is to leave it in and use it to self-insure long term care. If you ever need to, you can write off the portion of your withdrawals used to pay for ltc in excess of the 7.5% agi threshold. The net tax could then be much less than you would pay on Roth conversions. And, if it turns out that you don't ltc and end up with higher tax on your RMDs, well you will likely be able to afford it.
You forgot to mention that the QCD gambit is not allowed for 401K RMDs
What do you do when your IRA balance is higher each year after you take your RMD?
That was some amazing stock video! I really felt for Suzanne’s RMD dilemma!
Can't use a QCD if it's an inherited IRA.
My head is spinning.
Me too, yikes.
Yeah, he talks way too fast. Trying to process what he just said, he is already 3 sentences ahead.
Because as you say the TCJA expiration and married filling jointly when one spouse passes, plus the social security tax torpedo Suck it up do it all at once with a giant Roth conversion.
Yes, you will get hit with IRRMA for one year.
But after that, never worry about RMDs again and you will be in total control of your taxes forever. Even when one spouse passes. You may be lucky enough to never pay taxes again. It’s worth the one time hit.
Less taxes mean more food to the previous comment. Could you also discuss a QLAC and an in marriage QDRO and if earlier a one time HSA contribution as ways to reduce the deferred pot and hence reduce RMDs and taxes. Also can discuss optimum age timing for each ?
Thank you, your video was helpful.
Take your RMD. Then later same year contribute the max ($7000) back into to your IRA. That will offset your tax liability. The Secure Act allows you to contribute after 72. Just keep mind that you or your spouse will need to have enough earned income to contribute to your IRA
What's included in "earned income"?
@@golfergirl67 Earned income is income from wages. Does not include income from social security, pensions, interest, etc.
Rental income is also not considered earned income.
So to reduce RMD taxes I should give it to charity? Silly me, I always thought my 401K/IRA which I was feeding for 45 years was mine so I could live in retirement...
A mistake many of us were lead to believe….
You forget to mention the most important thing. Retirement accounts are at the mercy of the stock market. Corporate America and the politicians they bought forced the working class to gamble with their retirement money on stock market. I see many retired people bagging groceries and collecting shopping carts. Back at work after stock market ate away their retirement.
There are flaws in this logic:
- If you have mutual funds, there will be dividend and capital gains distributions that are unpredictable and often large, and can push you into the next IRMAA bracket
- A Roth conversion means that instead of deferring taxes, you are paying them earlier, so you lose the tax deferred compounding in your IRA on that money. You may not have enough remaining years in your life for the Roth to come out ahead
- The tax brackets in 2025 when the current TCJA expires will likely be replaced by something else that could be better
- If you have income from a pension, that is probably not going to have cost of living increases whereas the tax brackets will move up with inflation, so the effective tax rate on your overall income may go down over time
There are not flaws with the logic:
- We teach that you should not own mutual funds in your taxable account for this exact reason. Now if you have large unrealized gains that won't allow you to exit the taxable account prudently, then you need to leave room for the large potential capital gain.
- The math for Roth Conversions comes down to the rate (including penalties, tax hurdles, etc) you are paying today vs. the rate you are avoiding in the future. You only perform the conversion if you are confident you will be paying higher rates down the road. Once RMDs have begun, future RMD estimations become more accurate
- You have to plan under the rules we know today
- This is all built into the calculation. Note that the tax bracket rise through time in the charts we've shown. A good plan factors all of this in.
I believe his math, but you are correct that mutual funds can cause issues making it difficult to estimate later taxes. They suggest not owning mutual funds in taxable accounts, but I prefer to have some since one needs to have money in multiple buckets.
My mutual fund money has been good to pay for some expenses in retirement in my mid fifties, as well as to cover the taxes due on ROTH conversions. Before SS and 59.5 if you need money, I found them the best resource. The alternative would have been to just keep that money in savings accounts making little, where the mutual funds in many years made over 10%. Compounding over many years those mutual funds have made hundreds of thousands of dollars over what a savings account would have and were a useful tool as another source of readily available funds if needed.
Most CFPs say the same thing as Eric... your trad IRAs gains will be taxed when you withdraw or convert, either way. Once in the Roth they will gain tax free, comes out the same. Only advantage of Roth conv is if you will be in higher bracket in future...for many of us RMDs will force into higher brackets, + likely that tax cuts end as well.
Believe It Or Not: There are strategies after RMDs begin to help you reduce taxes. Thanks, Eric and Safeguard Wealth Management for continued content excellence!
Here's an RMD question the answer to which I have searched for hours. Your RMD is based on the value of your IRA on Dec. 31 of the previous year. If you use the Lifetime Table to compute the amount of your RMD, you are expected to divide the figure from that table into your balance. Logically, the DATE when that figure should be taken from the table would be the same day that the amount is computed. HOWEVER, my plan seems to use the date taken from my age at the end of the following year. Nowhere is this used date spelled out. If your plan withholds 10% for Federal tax, you must compute your RMD at the beginning of each year in order to compute the amount of withholding. This will then allow you to adjust your pension withholding amount. That's why I'd like to find where the DATE on which the Lifetime table is computed is explained. Every source on the WWW simply spouts that the table is used, but you are one year older at the end than at the beginning of the year. See my confusion?
IRMMA is eating me up!
According to your scenario the woman was 'surprised' to see how much was her RMD was? There is no excuse for anybody being that ignorant.
Really? Your arrogance is amazing. Based on my 50 years of experience paying attention to my investments, I’d argue that 90% of investors ARE that ignorant
But I don’t understand why it wouldn’t be better to do say, two years of maximum amount conversions, taking the hit for a couple of years, including irmaa, if that will assure elimination of taxable RMD’s
What if instead of Roth conversions, withdrawing greater than RMD to the next tax bracket & transferring to brokerage account may be more advantageous.
(1) Not paying on Roth conversions
(2) No QCD
(3) Reduces future RMD
(4) Easily accessible money & not tied up like in Roth IRA
(5) Step up basis for heirs
Please comment if any draw backs to what I am thinking
Thanks
Only thing is paying LTCG which is still better.
That would not help at all and be worse for you financially. Withdrawing extra money from a traditional IRA above the RMD is the same tax consequence as doing an Roth conversion on the same amount of money from the same traditional IRA. There is no tax difference in the current year between the two. However, by withdrawing the money to put in your taxable account, you forfeit the tax-free growth that happens in a Roth account after the conversion takes place. Money is not "tied up" in a Roth IRA when you are old enough to be forced to take RMDs any more than it is tied up in a traditional brokerage account.
How a out gift tax. How much you can give to you loved ones And reduce your taxes.
If you move the money to a tax deferred annuity, do those also have RMD’s?
Depending on the size of the tax deferred account converting to a Roth IRA can take many years if ever to make up for the taxes paid. Looked at this 3 ways from Sunday and it just does not make sense for me.
I had a financial plan done and it shows my income spiking into higher brackets once I start RMDs, income I don't even need. Roth conversions make sense for me.
@@johng4093 I have never taken a rmd payout, roll it into my joint taxable account and reinvest it into a municipal bond fund.
Great presentation
I read an article yesterday that said a new law just passed changing the RMD age from 72 to 75 and one lawmaker wants to eliminate the RMD completely do you have any knowledge of this?
The 75 RMD isn’t projected to go into effect until 2033.
Why would they eliminate rmd? They want, need their taxes money.
@@hubster4477 they will eventually get it. They just want to tell you when and how much. Why should they control my money and tell me when and how to spend it.the government has too much control.
I've been told you can move 401k money to an IRA and pay the taxes on it then move it over to a Roth IRA to shield future gains from taxes. Is this true and if so is there a limit to how much money you can move through this process? This would be money I'd move before age 72 so not RMD money. Also can you pay the taxes out of the money you are moving? So say you move $100k chunks each year and owe 30% fed and state on it you would pay $30000 tax and end up with $70000 in your Roth.
@Tim. You can just go from 401k to Roth IRA directly.
There is no limit. The more you convert in any given year then the higher the tax bracket. So you would ideally only convert an amount that puts you into a lower tax bracket.
You can’t pay the taxes out of “conversion” but you can from “withdrawals”.
Your tax calculations are way off also.
Even 100k remember you get a 12k standard deduction. So this puts you at 88k taxable income. If you’re over 65 you get an additional 1,400.
The 22% bracket is up to 89,075. It’s a step up basis also.
There is 12% bracket. So your first 41,775 is taxed at 12%. Anything above up to 89,075 is at 22%. So effect tax rate more like 18-19%
Even with state tax at these levels it can’t be at 10%. More like 3-5%.
So overall 23%
So if you “convert” 100k then you have to come up with 18-19k for taxes. That’s a lot of money. Yes?
Since many don’t have excess cash on hand you have to do like 75% conversion and 25% withdrawal. So you convert 75k from 401k to Roth IRA then withdraw 25k from 401k into your regular bank account. It’s still 100k gross income concept.
Write a check to IRS and state. Careful with estimated tax payments. You would have a little excess cash too.
Some other ways you can achieve cash on hand is to sell your home and/or cars.
The added benefit is that if you move to a no income tax state you can save maybe 5-10% in state taxes.
You may want to look at and study your past tax returns.
@@f430ferrari5 I think they said if I move it to the IRA and park it there then I can feed the Roth the amount each year to avoid hitting the next tax bracket. They said going from 401k to IRA is not a taxable event. I'd wait until December to see what kinds of capital gains and dividends will stack on income to determine the number that goes to the Roth. I made a big mistake. I should have never funded my entire 401K with pretax money.
@@timtoolman9940 yes going from 401k to IRA is not taxable.
Maybe the recommendation is so when moving the IRA some portion is kept in money market?
Just be aware that 401k offers more protection pertaining to legal matters.
I would not say you made a mistake either. We all tend to feel this way when looking at a Roth.
Not sure how you saved in 401k but if your balance isn’t that high you can probably just take annual withdrawals on top of SS and still be in the tax bracket you want to be in.
It’s important you know how SS is potentially taxed. It may not be as high as you think.
Most were better off going tax deferred. There is a window to convert and this method is better than going straight Roth from the beginning.
For anybody starting work now and they are in low bracket to begin with then Roth IRA makes sense. It doesn’t have to be even a lot. 1k per year starting at 25 years old can grow big.
@@f430ferrari5 I'll need to study your post here a lot of very good information in it. So it goes 401k to Roth then to pay the tax I withdraw from the Roth? Or better if I have other sources for the tax which I do an can use those for taxes and leave the Roth money in there. I remember the IRA step was when I was thinking about dissolving the 401k which I decided not to do that, if I can move about half the 401k to Roth over 7 years that would really help when RMDs start.
@@timtoolman9940 for some state taxes, 401k withdrawals are counted as pension income vs ira withdrawals have normal income tax.
If you don't need the funds from your RMD, you can give it directly to a charity. It counts as your RMD, but you owe no tax and it does not show as income.
Yes, it's called a QCD (Qualified Charitable Distribution). It must go DIRECTLY from the IRA to the charity, it must NOT go to you in between.
@@jimlow6824 - Yes, that is it exactly. It completely avoids the tax man - and if you don't need the funds I think it becomes a win/win
That's what I plan to do.
Please confirm - you can only do this with IRAs and not 401ks?
I know you're trying to help, but this is absolutely RIDICULOUS. . .The insanely complicated machinations you describe to try to deal with this is the best evidence of how absurd our tax system is. The only reason any of this is complex or requires "learning" convoluted strategies is because the government WANTS to beat its own citizens down. YES it does. It wants as much of your money as possible and does NOT care about how that affects you. You're supposed to spend time and/or money to "learn" how to circumvent the government's "rules". The reason is because our government has NO interest in its own citizens at all. NO, it really doesn't. If it did it would go out of its way to make things easier, simpler and more beneficial for the people, NOT for itself. That's been true of EVERY society that has ever existed, and its true of America as well.
If I roll-over, my 401 k and IRA to my new job will I need take RMD'S ? My understanding is with my new employer I am not required to take an RMD while still woking , even after age 72.
Also take unneeded RMD and perform ROTH conversion at the beginning of the year. This will move that years gains out of the qualified accounts (IRA, 401k) and into the non-qualified accounts (brokerage or ROTH). Of course the market could have no gains that year so some years you would lose but you can't time the market. I do my conversions in January and when I turn 72 I plan on taking any RMD that I don't need to spend in January. If I need RMD for income I plan on taking them monthly.
This makes no sense. You want to leave the RMD money in your IRA until the end of the year so that you can continue to earn money on it during the year (assuming the stock market is going up), and keep that year's gains from being taxed in that year
@@topliner9534 If I do that my RMDs keep growing. If I take RMDs I do not need at the beginning of the year I help minimize RMD creep. If I invest in a mix of exchange traded index funds and never sell the ETF I will owe no tax on the gains in the brokerage account. When I die the tax on the ETF disappears so my heirs owe nothing. If I keep it in the IRA then that will grow increasing RMDs increasing taxes each year. When I die my heirs will have to withdraw the IRA over ten years and owe taxes on the withdrawals. My way the heirs get the ETF with no taxes owed due to the cost basis step up (in addition to owing no taxes on my Roth). This only works if I do not need the RMD. RMDs I need to live I would take out on a monthly basis to keep as much in the IRA or the ETF brokerage account sheltered from taxes..
At first glance it seems I'm doing it backwards but if I'm disciplined and truly don't need the RMD, this is one way to minimize taxes.
I read this article yesterday. The RMD age is changing and also one lawmaker is pushing to eliminate it completely. Fingers crossed but if not I love your plan and I will use it by converting to Roth.
Transformative’ retirement reform package passes the House and heads to the Senate
@@cgmoog Proponents note Secure 2.0 will give retirees - who are living longer than previous generations - more flexibility as they manage a longer retirement.
For one thing, it gives workers more options for “catch-up" contributions as they near retirement, up to $10,000 per year. Another key provision gradually raises the age for taking mandatory distributions from 401(k) plans or IRAs to 75 from 72.
Some lawmakers want to take things even further with required minimum distributions. “My goal is to get rid of it completely,” Brady said of the age restrictions on distributions during an appearance at the Bipartisan Policy Center Solutions Summit streamed on Yahoo Finance in 2020.
@@cgmoog You, of course, are correct.
Eric, maybe you mentioned it, but I can’t find it . . .
* @ 4:50 you told us that the couple had delayed taking SS (I assume age 70)
* and now it was time to take RMDs ( I assume age 72: RMD = 3.91%, so $38k is the RMD for $978k)
* what is the Total Social Security Benefits being drawn by this couple?
Are you still required to withdraw RMD's even if you've rolled over or invested to another company?
Yes
At some point and time, for me it's age 73. The government wants its fair share in taxes. If you don't plan on spending it at that time you can roll it into a Roth account.
@@robertfugate5827 you cannot roll over a traditional account into a Roth account. You can do conversions but that is not the same as roll over
So you lower your RMD, then what ? Died with cash untouched for your heirs?
Go spend it.
The point is to reduce your "donation" to Uncle Sam so you can take out MORE money on YOUR schedule without being taxed on it.
Take your withdrawals out earlier than rmd, wouldnt that solve the problem?
Reading about people grabbing multi-figures monthly as incomes in investments even in this crazy days in the market, any pointers on how to make substantial progress in earning? I would appreciate
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It's easy to reach her through her telegrm channel
Brilliant!
Does your firm offer a one-time client project fee to develop a forward looking tax plan, or do you only offer those services to clients who place their investment portfolio under your firm’s management?
Thanks- Craig F.
I am also interested in this service if available.
I am also interested in consulting you
How can I reach somebody?
@@nalinijanakiraman2481 I e-mailed them with the same question! They only do the full asset management and only on portfolio's $3 million and up. No fee-for-service at this time. I believe they could have a HUGE business creating forward looking plans for folks. I'd pay big $$ for it. Oh, well.
There are fee-only CFPs out there that can do the same thing. Usually the initial consultation is free.
Got me thinking... consider the situation of only one spouse covered by Medicare for the next several years.
I am just under 60 and my wife is 66.5, obviously she's already started Medicare.
Since we're only paying Medicare premium for one, if we exceed that first IRMAA threshold in 2022 we would only be paying about $700 extra in 2024. That in and of itself may not be reason enough to limit IRA conversions, especially if you manage conversions so you only pay the higher premium for 1 year.
Even so, we probably will choose to stay under the 24% bracket. (Her IRA 913k, my IRA 1350k).
I am like Suzanne. Turning 72 this year and taking an RMD wallop. As far as taking a Roth conversion, I believe that that ship has sailed. Too expensive and too complicated at this point. But you never did talk about a deferred annuity, which could take a bit of the bite from your required minimum distribution.
Yup he didn’t mention a QLAC(Qualified Longevity Annuity Contract) as a way to reduce RMD’s but the most you can put in a QLAC is 25% of IRA or $135k whichever is less. But it’s also only kicking the can down the road up to age 85.
I too am wondering if a QLAC makes sense.
@@stephaniejames4775 talk to a Financial Advisor. If you can defer $135k into a QLAC it saves you from RMD amount about $5k/yr less withdrawals required at age 72.
After the QCD, my RMD goes to uncle sam to cover the taxes on the ROTH conversion.
Same here; also a portion to account fees. I see no $$$s; just paperwork.
$50,000 RMD? Why are all these videos aimed at the wealthy? We all have RMDs if we have an IRA. I guess the wealthy is how these guys make their living. I’ll keep searching for help for the rest of us.😢
It's very interesting how something targeted for 70+ individuals is being put on TH-cam. Would love to see the metrics of 70+ viewers. Just wanted to add Secure Act 2.0 passing would change future RMD age. As of now it'll be 73 starting next year, 74 in 2029 and 75 in 2032.
Actually, I think his target audience is people 72 and older, plus people who would like to someday become 72 and older and want to think ahead and prepare.
A lot of viewers will watch just because he has consistently good content.
I'm 71. I was wondering why I had not heard a lot about all of this when I was younger. It should be targeted at folks in their 30s and older so they will understand and be able to lan better for retirement. I found all of this RMD, Roth, IRRMA, retirement taxation stuff to be very confusing and complicated, and I have an MBA.
@@markpaul8255 Back then it wasn't but now with the Internet people don't have an excuse not to know. I'm 34 and just by watching a few videos and reading the IRS documentation you can learn 70% of what you need to plan for retirement.
Sorry, you poor rambling sentence structures confuse the concepts and your graphs make it worse. Your videos show you fail at teaching, I will not watch any other video by you. I understand why another comment said their head was spinning, Please hire a writer who more clearly explains - because you can't,
Button down your button down collar!
Just have more taxes taken out of your RMD so you get it back with a tax refund.
Explain please.
I think ROTH IRAs should just be gotten rid of, they were supposed to be for modest amounts of money of modest income people to avoid some cap gains taxes, but clearly the entitled rich people abuse them to avoid paying their taxes and to get subsidized health care. This just pushes more of the tax burden onto people who are working. If an old person has more money than they can spend in their lifetime (the RMD schedule is designed to not use up the account until age 120), why not pay taxes like everyone else. It seems very unpatriotic.